Loan Agreements

Loan Agreements

Many businesses enter Loan Agreements with banks or financial institutions and simply sign the lender’s “standard” form. The standard form tends to be very one-sided in favor of the lender, with various restrictions on the borrower. The borrower under a Loan Agreement needs to fully understand (and negotiate better terms than those contained in the standard form) a number of key issues, including the following:

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• The total cost of the loan

• The payment schedule

• The right to prepay the loan without penalty

• The flexibility on the use of the loan proceeds

• The right to cure defaults

• The appropriate representations and warranties of the borrower

• The covenants that can trigger a default

Respond to the questions below, select the Forum link, then click on Create Thread and type in your posting. To respond to a minimum of 2 classmates, first, click on one of their postings, read it, and then select REPLY. Please type your NAME in the Subject field.

1. What next information did you learn from this article that will be useful to you in the type of business that you work in currently or plan to work in?

2. What other types of contracts exist that were not included in this article that you have seen or know exist and what are they used for?

3. I have used “Legalzoom.com” to purchase contracts to use in business. I have known some business owners who don’t want to pay a lawyer $500 + an hour to draft contracts when starting a business and contract business without them for years. There are many risks you will make running a business or being a business owner. In your business what decision would you make regarding using contracts? Explain why?

4. Many times I have done business transactions with other businesses and customers which involved contracts. There are times when I read contracts and read the “fine print” I am unable to understand much of the legal words and jargon but I sign anyway. Some contracts are so long and detailed that it would take hours just to review. Have you experienced this? Discuss an example of an occasion you lived. Talk about what type of contract it was, how where you were involved and what did you do to understand or explain the contract to another party?

5. When a contract is not involved in a sale transaction it is considered an “as is sale.” Sometimes sales are conducted with no recourse for closeout merchandise stated as “all sales final.” These types of transactions can be good or bad for the seller and the buyer. How would you explain this, include reasons and examples to support your views and defend them?